Japanese Investors Increasingly Switching From Traditional FX Trading to Bitcoin

by ·
December 17, 2017

A growing number of Japanese retail investors are switching from leveraged FX trading to leveraged cryptocurrency trading, thus driving the crypto market, according to a recent Deutsche Bank’s research. Operators of Japan’s largest FX platforms are launching their own crypto exchanges, offering leverage of up to 25x.

From Traditional FX to Bitcoin

Masao Muraki, Head of Research at Deutsche Securities Inc (DSI) in Japan, said last week that Japanese retail investors are increasingly moving from traditional FX trading to cryptocurrency trading. DSI is a member of the Deutsche Bank Group.

Muraki explained that investors are shifting their focus to leveraged crypto trading after failing to meet their profit goals with leveraged FX trading, CNBC reported.

Citing “speculation in cryptocurrency is growing to a scale that cannot be ignored,” he elaborated:

We think that retail investors are shifting from leveraged FX trading to leveraged cryptocurrency trading…Japanese men in their 30s and 40s who are engaged in leveraged FX trading are driving the cryptocurrency market.

The analyst noted that Japan accounts for 54% of global FX margin trading. According to data from GMO Click Securities, one of the world’s largest FX trading platforms, 79% of Japanese FX accounts are held by men, and 63% of them are between ages 30 and 49.

Japanese retail investors are also known as Mrs. Watanabe even though most of them are men. However, traditionally they were housewives running their households’ finances.

High Risk, High Return

Leveraged cryptocurrency trading services are available in Japan. For example, GMO Coin offers 5x, 15x and 25x leverage for bitcoin-yen trading. There is no transaction fee but the leverage fee is 0.05% per day. GMO Coin is the cryptocurrency subsidiary of GMO Internet, which also owns GMO Click Securities.

Muraki was quoted by the Financial Times:

Some major FX brokers are using the same 25-times leverage limit that applies to FX trading, but there are no direct rules in leveraged trading of cryptocurrency.

Citing that cryptocurrency transactions can take 10 minutes or more, the analyst said that “the risk of incurring losses greater than margin is higher than in normal FX trading, due to high intraday volatility.”

However, he also noted that “Japanese investors have positive views on volatility,” adding that “a typical Japanese investment style is a combination of low risk – low return deposits and high risk – high return investment,” the Wall Street Journal reported.

FX Platform Operators Entering Crypto Trading Business

An increasing number of leading Japanese FX platforms are developing cryptocurrency exchanges after the Japanese government legalized bitcoin as a method of payment in April.

News.Bitcoin.com reported in May on a growing number of companies registering with the Financial Services Agency (FSA) in order to offer bitcoin products and services to Mrs. Watanabe.

GMO Internet, the parent company of GMO Click Securities, launched its own bitcoin brokerage service called GMO Coin in May.

SBI Group, which has an FX subsidiary called SBI FX Trade, is launching 8 different crypto businesses including an exchange called SBI Virtual Currencies.

Money Partners Group, which owns Money Partners FX platform, has invested in Kraken and Tech Bureau, the operator of Zaif exchange. The group has announced its plan to launch a crypto exchange.

Kabu.com Securities, a part of the Mitsubishi UFJ Financial Group (Mufg), also offers FX margin trading services and has a plan to launch its own crypto exchange.

Entertainment giant DMM.com, which owns an FX business called DMM FX, is launching a bitcoin mining operation as well as a crypto trading business called Next Currency in the spring of next year.

Do you think more Japanese investors will switch from leveraged FX trading to leveraged crypto trading? Let us know in the comments section below.